Right now, global rail transportation is experiencing some major changes. This is a direct response to several occurrences, including pandemic-related industry demand shifts, significant rail mergers and closures, as well as the need to implement new technology to improve productivity. That said, with so much going on, the U.S. rail industry is looking very different from years past.
To better understand the situation, today, we will look at some current trends and their impacts on shippers.
Current Trends
- Updates To Operations
In a recent article from The LoadStar the issues of outdated systems combined with personnel shortages -- missed switchings, delays in yards, and others -- were brought to light. In the end, it was stated that, when moving forward, rail companies need to start investing in and implementing plans to improve efficiency and reliability.
- Fuel Price Increases
With the U.S. and global economy still working to stabilize its supply chain, it will come as no surprise to hear that fuel prices are rising due to disruptions -- limited access to delivery connections and high demand. All of this has resulted in gas prices that are at the highest since 2014.
- Frequency Increases
By 2050, rail activity is expected to double. A positive trend -- one that will bring lots of revenue to the rail system -- this prediction is based on the fact that intermodal transportation is a lot cheaper than trucking. More companies will turn to railway over trucking in efforts to cut rising costs across the supply chain.
Shipper Impacts
When all is said and done, the three trends stated above combine to result in one thing: rail industry surcharges. This is because rail companies calculate their rates based on fuel prices and frequency. On top of that, when required to improve operations, the companies need capital to hire employees, adapt equipment, etc.
During peak season, US railroads were implementing surcharges for fuel and free time at terminals, even in ones that usually do not see increases. For example, Union Pacific in Dallas and Houston. How long it will last is unknown, but what is known is that surcharges remain high even after peak season.
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